Posted by: Louis Lavelle on December 17, 2008
Yale President Richard C. Levin announced yesterday that the much anticipated new campus for the Yale School of Management will be delayed “until funding is secured or market conditions improve.” The move was prompted by an estimated decline in Yale’s endowment of 25%—to $17 billion, from $22.9 billion on June 30—and is part of a broader belt-tightening initiative, described by Levin in his announcement.
Yale is moving forward with design work on the new SOM campus, a 246,000-square-foot complex that had been scheduled for completion by 2011 and is expected to cost $150 million. Yale hopes to sell naming rights to the new campus for $100 million, but it’s unclear where the remainder will come from. It’s also unclear how long the delay will be, given that Levin said he expects flat endowment returns through the 2009-10 academic year, with growth not resuming until after June 30, 2010.
This is not the first school to announce a big hit to its endowment—Harvard alone lost $8 billion in just four months—but it’s the first one that I know of where a major new business school construction project was delayed as a result.
The impact at Yale is on par with several other schools. Levin says the school is expecting a budget shortfall of $100 million in 2009-10, growing to more than $300 million by 2013-14. Since the endowment supplies 44% of the $2.7 billion Yale spends each year, cuts are necessary, he said. Levin noted the need to act quickly and decisively:
Even closing half to two-thirds of the budget gap that we anticipate over the next few years has consequences that I wish we could avoid. But if we fail to make significant adjustments now, we would inevitably need deeper cuts later. In recent years, we have been in the fortunate position of being able to pursue many new ideas and exciting initiatives. Now we will have to make harder choices. I am confident that faculty and staff throughout the University will rally to the challenge...
Harder choices indeed. Read the details of the budget cuts in Levin's letter, and in this story in the Yale Daily News.